Honeywell Reports 2006 Sales Up; Free Cash Flow Up 41% to $2.5 Billion

Q4 Sales up 14% to $8.3 Billion, EPS up 18% to $0.72, Free Cash Flow Up 54% to $941 Million

Company Confident in Strong 2007 Financial Outlook and Increases Free Cash Flow Guidance

MORRIS TOWNSHIP, N.J., Jan. 26 -- Honeywell today announced full-year 2006 sales increased 13% to $31.4 billion from $27.6 billion in 2005. Earnings per share were up 31% to $2.52 versus $1.92 in the prior year. Earnings per share growth was 30%, after taking into account income from discontinued operations ($0.11) and a tax- charge for cash repatriation in 2005 ($0.18), and stock options expense in 2006 ($0.07). Cash flow from operations was up 31% to $3.2 billion versus $2.4 billion in 2005, and free cash flow (cash flow from operations less capital expenditures) was up 41% to $2.5 billion versus $1.8 billion in the prior year.

Fourth-quarter sales were up 14% to $8.3 billion. Earnings per share increased 18% to $0.72 versus $0.61 in the prior year fourth quarter. Earnings per share growth was 28%, after taking into account income from discontinued operations in the fourth quarter of 2005 ($0.04), and stock options expense in 2006 ($0.01). Cash flow from operations was up 48% to $1.2 billion versus $839 million in the prior year, and free cash flow was up 54% to $941 million versus $611 million in the fourth quarter of 2005.

"Honeywell made great progress in executing its growth strategy in 2006," said Chairman and Chief Executive Officer Dave Cote. "We reached a new financial performance threshold by surpassing $31 billion in sales, delivering 31% EPS growth and increasing free cash flow by 41%. In addition, we returned more than $2.6 billion to shareowners through share repurchases and dividends, and increased the dividend rate by 10% for the third consecutive year."

"We expect to build on our successful track record in 2007," continued Cote. "Despite our forecast for modest softening in global economic conditions, we believe that favorable macro-trends and demand for differentiated technologies, products and services provide opportunities for sustained growth at Honeywell. In 2007, we expect sales to be up 5% to approximately $33 billion, double digit earnings growth to $2.85 - 2.95 per share, and we have increased our free cash flow guidance to $2.5 - 2.7 billion (cash flow from operations of $3.3 - 3.5 billion)."

  Fourth-Quarter Segment Highlights

  Aerospace

  * Sales were up 8%, compared with the fourth quarter of 2005, driven by
    10% growth in Commercial and 6% growth in Defense and Space sales.
    Commercial sales reflected growth of 14% in original equipment and 7% in
    aftermarket spares and services.  Defense and Space sales were driven by
    a 9% increase in Defense sales in the quarter.

  * Segment margins were 18.2%, compared with 16.9% a year ago, driven by
    volume growth, price and productivity gains, which more than offset the
    negative impacts from inflation and stronger Commercial original
    equipment sales mix.

  * Honeywell booked several significant military wins during the quarter
    including: a two year, $404 million extension for the Total InteGrated
    Engine Revitalization (TIGER) program to improve and extend the life of
    the AGT1500 turbine engine for the Abrams family of vehicles; a three
    year, $39 million agreement to supply Tactical Advanced Land Inertial
    Navigator (TALIN) to the U.S. Army; and, a $36 million, three year
    agreement with Lockheed Martin and the Turkish and Greek Air Forces for
    F-16 cockpit displays.

  * Honeywell signed a $68 million supply contract with Lion Air, a low-cost
    domestic airline based in Jakarta, Indonesia, for its fleet of 60 new
    737NG aircraft and a five year, $35 million supply agreement with Cathay
    Pacific Airlines to provide RDR-4000 next-generation weather radar
    system and other communications and navigation equipment.

  Automation and Control Solutions

  * Sales were up 17%, compared with the fourth quarter of 2005, driven by
    organic sales growth of 11% (9% in the Products and 16% in the Solutions
    businesses) and the net impact of acquisitions and divestitures of 6%.

  * Segment margins were 12.6%, compared with 12.4% a year ago, due to
    volume, price and productivity savings, which more than offset the
    negative impacts of inflation, sales mix and the dilutive impact of
    acquisitions.

  * Building Solutions had more than 20% orders growth in the quarter,
    including more than 40 energy-related contracts, and announced a $9.5
    million energy retrofit and facility renewal program with Toronto East
    General Hospital.  The 15-year program is expected to save the hospital
    more than $880,000 in annual operating costs.

  * Process Solutions had more than 17% orders growth in the quarter and
    announced several significant contract wins, including a $4.7 million
    contract for Italcementi Group's new production facility in West
    Virginia; a $3.7 million contract with Huntsman for its new polyethylene
    plant in Wilton, UK; a $2.8 million contract with National Grid Grain
    LNG Ltd in the UK and a $5 million contract with Harmsworth Quays
    Printing Ltd in London.

  * Sensing and Controls announced that in cooperation with Michelin it has
    developed a pressure sensor that is a key component in the new Michelin
    eTire II monitoring system. The sensor incorporates wireless surface
    acoustic wave (SAW) technology that helps truckfleet managers accurately
    monitor tire pressure for improved fuel efficiency and extended tire
    life.

  Transportation Systems

  * Sales were up 9%, compared with the fourth quarter of 2005, due to
    increased passenger vehicle Turbo Technologies sales and the positive
    impact of foreign exchange, partially offset by the impact of lower
    consumer spending on automotive aftermarket product sales.

  * Segment margins were 11.6%, compared with 11.0% a year ago, due to
    productivity and volume growth in the Turbo Technologies business,
    partially offset by inflation and lower sales of automotive aftermarket
    products.

  * Turbo Technologies recorded a greater than 60% win rate on all passenger
    vehicle platforms and a greater than 70% win rate on all commercial
    vehicle platforms awarded worldwide during 2006.  The platforms related
    to these wins will launch in 2008 and 2009.

  * Consumer Products Group launched a number of new offerings for do-it-
    yourself consumers during the quarter, including a premium light truck
    FRAM(R) air filter and a high-performance Autolite(R) sparkplug.

  Specialty Materials

  * Sales were up 25%, compared with the fourth quarter of 2005, driven by
    the net impact of acquisitions and divestitures of 24% and organic sales
    growth of 1%.

  * Segment margins were 7.3% compared with 7.2% a year ago, due to
    favorable price and raw material costs, which offset the impacts of
    inflation and unfavorable sales mix.

  * Specialty Materials announced it is tripling its research and
    development laboratory space in its Asia Technology Center to boost R&D
    capabilities and meet increasing customer needs in Asian markets,
    particularly China.

  * During the quarter, UOP signed over $300 million in new orders and
    established a new business dedicated to developing innovative
    technologies for converting renewable bio-feedstocks into fuel and
    chemicals.

Honeywell will discuss its results during its investor conference call today starting at 8:00 a.m. EST. To participate, please dial (706) 643-7681 a few minutes before the 8:00 a.m. EST start. Please mention to the operator that you are dialing in for Honeywell's investor conference call. The live webcast of the investor call will be available through the "Investor Relations" section of the company's Website (http://www.honeywell.com/investor). Investors can access a replay of the webcast starting at 11:00 a.m. EST, January 26, until midnight EST, February 2, by dialing (706) 645-9291. The access code is 5029474.

Honeywell International is a $31 billion diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services; control technologies for buildings, homes and industry; automotive products; turbochargers; and specialty materials. Based in Morris Township, N.J., Honeywell's shares are traded on the New York, London, Chicago and Pacific Stock Exchanges. It is one of the 30 stocks that make up the Dow Jones Industrial Average and is also a component of the Standard & Poor's 500 Index. For additional information, please visit www.honeywell.com.

This release contains certain statements that may be deemed "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. The forward-looking statements included in this release are also subject to a number of material risks and uncertainties, including but not limited to economic, competitive, governmental, and technological factors affecting our operations, markets, products, services and prices. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements.

  

                       Honeywell International Inc.
             Consolidated Statement of Operations (Unaudited)
            -------------------------------------------------
                  (In millions except per share amounts)

                                    Three Months Ended December 31,
                                    -------------------------------
                                         2006              2005
                                        ------            ------
       Product sales                    $6,644            $5,847
       Service sales                     1,632             1,428
                                        ------            ------
       Net sales                         8,276             7,275
                                        ------            ------

       Costs, expenses and other
           Cost of products sold         5,179 (A)         4,661 (A)
           Cost of services sold         1,179 (A)           976 (A)
                                        ------            ------
                                         6,358             5,637
           Selling, general and
            administrative expenses      1,085 (A)           936 (A)
           Other (income) expense          (42)             (111)(B)
           Interest and other financial
            charges                         94                96
                                        ------            ------
                                         7,495             6,558
                                        ------            ------

       Income from continuing
        operations before taxes            781               717
       Tax expense                         196               212
                                        ------            ------

       Income from continuing
        operations                         585               505

       Income from discontinued
        operations, net of taxes             -                30
       Cumulative effect of accounting
        change, net of taxes                 -               (21)
                                        ------            ------
       Net income                         $585              $514
                                        ======            ======

       Earnings per share of common
        stock - basic:
           Income from continuing
            operations                   $0.72             $0.60
           Income from discontinued
            operations                       -              0.04
           Cumulative effect of
            accounting change                -             (0.03)
                                        ------            ------
           Net income                    $0.72             $0.61
                                        ======            ======
       Earnings per share of common
        stock - assuming dilution:
           Income from continuing
            operations                   $0.72             $0.60
           Income from discontinued
            operations                       -              0.04
           Cumulative effect of
            accounting change                -             (0.03)
                                        ------            ------
           Net income                    $0.72             $0.61
                                        ======            ======

       Weighted average number of
        shares outstanding-basic           811               836
                                        ======            ======

       Weighted average number of
        shares outstanding -
        assuming dilution                  817               839
                                        ======            ======

   (A) Cost of products and services sold and selling, general and
       administrative expenses include amounts for repositioning and other
       charges, pension and other post-retirement expense for 2005 and 2006,
       and stock option expense for 2006.

   (B) Includes $23 million gain on sale of our North American Nylon Carpet
       Fiber business and $26 million of equity income relating to our 50%
       equity interest in UOP (prior to our acquisition to full ownership in
       November 2005).

                       Honeywell International Inc.
             Consolidated Statement of Operations (Unaudited)
              ----------------------------------------------
                  (In millions except per share amounts)

                                    Twelve Months Ended December 31,
                                    --------------------------------
                                         2006              2005
                                        ------            ------

      Product sales                     $25,165           $22,257
      Service sales                       6,202             5,395
                                        -------           -------
      Net sales                          31,367            27,652
                                        -------           -------
      Costs, expenses and other
          Cost of products sold          19,649 (A)        17,681 (A)
          Cost of services sold           4,447 (A)         3,843 (A)
                                        -------           -------
                                         24,096            21,524
          Selling, general and
           administrative expenses        4,210 (A)         3,707 (A)
          Other (income) expense           (111)             (231)(B)
          Interest and other financial
           charges                          374               356
                                        -------           -------
                                         28,569            25,356
                                        -------           -------

      Income from continuing operations
       before taxes                       2,798             2,296
      Tax expense                           720               732
                                        -------           -------

      Income from continuing operations   2,078             1,564
      Income from discontinued
       operations, net of taxes               5                95
      Cumulative effect of accounting
       change, net of taxes                   -               (21)
                                        -------           -------
      Net income                         $2,083            $1,638
                                        =======           =======

      Earnings per share of common
       stock - basic:
          Income from continuing
           operations                     $2.53             $1.85
          Income from discontinued
           operations                      0.01              0.11
          Cumulative effect of
           accounting change                -               (0.03)
                                        -------           -------
          Net income                      $2.54             $1.93
                                        =======           =======

      Earnings per share of common
       stock - assuming dilution:
          Income from continuing
           operations                     $2.51             $1.84
          Income from discontinued
           operations                      0.01              0.11
          Cumulative effect of
           accounting change                -               (0.03)
                                        -------           -------
          Net income                      $2.52             $1.92
                                        =======           =======

      Weighted average number of shares
       outstanding-basic                    821               849
                                        =======           =======

      Weighted average number of shares
       outstanding - assuming dilution      826               852
                                        =======           =======

   (A) Cost of products and services sold and selling, general and
       administrative expenses include amounts for repositioning and other
       charges, pension and other post-retirement expense for 2005 and 2006,
       and stock option expense for 2006.

   (B) Includes $107 million of equity income relating to our 50% equity
       interest in UOP (prior to our acquisition to full ownership in
       November 2005).

                       Honeywell International Inc.
                         Segment Data (Unaudited)
                         -----------------------
                          (Dollars in millions)

                                           Periods Ended December 31,
                                           --------------------------
     Net Sales                          Three Months       Twelve Months
     ---------                          ------------       -------------
                                        2006     2005      2006      2005
                                        ----     ----      ----      ----
     Aerospace                          $2,955   $2,725   $11,124   $10,496

     Automation and Control Solutions    3,045    2,592    11,020     9,416

     Specialty Materials                 1,083      865     4,631     3,234

     Transportation Systems              1,193    1,093     4,592     4,505

     Corporate                             -        -         -           1
                                         -----    -----     -----     -----
          Total                         $8,276   $7,275   $31,367   $27,652
                                        ======   ======   =======   =======

  Reconciliation of Segment Profit to Income From Continuing Operations
   --------------------------------------------------------------------
                               Before Taxes
                               -----------

                                            Periods Ended December 31,
                                             ------------------------
      Segment Profit                     Three Months      Twelve Months
                                         ------------      -------------
                                        2006       2005   2006        2005
                                        ----       ----   ----        ----

  Aerospace                             $538      $460  $1,892      $1,676

  Automation and Control Solutions       385       322   1,223       1,065

  Specialty Materials                     79        62     568         257

  Transportation Systems                 138       120     574         557

  Corporate                              (43)      (44)   (177)       (173)
                                       -----     -----   -----       -----
        Total Segment Profit           1,097       920   4,080       3,382

  Other income/ (expense)                 42       111     111         231
  Interest and other financial charges   (94)      (96)   (374)       (356)
  Stock option expense (A)               (16)        -     (77)          -
  Pension and other postretirement
   expense (A)                          (115)     (138)   (459)       (561)
  Repositioning and other charges (A)   (133) (B)  (80)   (483) (B)   (400)
                                       -----     -----   -----       -----
        Income from continuing
         operations before taxes        $781      $717  $2,798      $2,296
                                       =====     =====   =====       =====

  (A) Amounts included in cost of products and services sold and selling,
      general and administrative expenses.

  (B) In the three months and year ended December 31, 2006, Company reduced
      asbestos related reserves for existing Bendix and NARCO current and
      future claims respectively, resulting in a benefit of $325 million and
      has established a liability for the estimated value of future
      anticipated claims relating to Bendix resulting in a charge of $335
      million.

                       Honeywell International Inc.
                  Consolidated Balance Sheet (Unaudited)
                  --------------------------------------
                          (Dollars in millions)

                                      December 31,              December 31,
                                         2006                       2005
                                        -------                   --------

     ASSETS
     Current assets:
         Cash and cash equivalents       $1,224                     $1,234
         Accounts, notes and other
          receivables                     5,740                      5,017
         Inventories                      3,588                      3,401
         Deferred income taxes            1,213                      1,243
         Other current assets               470                        542
         Assets held for disposal            67                        525
                                         ------                     ------
           Total current assets          12,302                     11,962

     Investments and long-term
      receivables                           382                        370
     Property, plant and equipment -
      net                                 4,797                      4,658
     Goodwill                             8,403                      7,660
     Other intangible assets - net        1,247                      1,173
     Insurance recoveries for asbestos
      related liabilities                 1,100                      1,302
     Deferred income taxes                1,021                        730
     Prepaid pension benefit cost           695                      2,716
     Other assets                           938                      1,062
                                        -------                   --------
           Total assets                 $30,885                    $31,633
                                        =======                   ========

     LIABILITIES AND SHAREOWNERS' EQUITY
     Current liabilities:
         Accounts payable                $3,518                     $2,886
         Short-term borrowings               62                        275
         Commercial paper                   669                        754
         Current maturities of long-term
          debt                              423                        995
         Accrued liabilities              5,455                      5,359
         Liabilities related to assets
          held for disposal                   8                        161
                                         ------                     ------
           Total current liabilities     10,135                     10,430

     Long-term debt                       3,909                      3,082
     Deferred income taxes                  296                        334
     Postretirement benefit obligations
      other than pensions                 2,090                      1,786
     Asbestos related liabilities         1,262                      1,549
     Other liabilities                    3,473                      3,690
     Shareowners' equity                  9,720 (A)                 10,762
                                          -----                     ------
           Total liabilities and
            shareowners' equity         $30,885                    $31,633
                                       ========                    =======

  (A) At December 31, 2006, shareowners' equity was reduced by
      approximately $1.5 billion, net of taxes, from the adoption of FAS 158
      relating to accounting for pensions and postretirement benefits that
      requires the Company to recognize the funded status of defined benefit
      plans in the consolidated balance sheet.

                       Honeywell International Inc.
             Consolidated Statement of Cash Flows (Unaudited)
             -----------------------------------------------
                          (Dollars in millions)

                                                           Twelve Months
                                       Three Months Ended      Ended
                                          December 31,      December 31,
                                      ------------------  ----------------
                                         2006     2005     2006     2005
                                      --------   -------  ------   -------
     Cash flows from operating
      activities:
         Net income                        $585     $514   $2,083   $1,638
         Adjustments to reconcile net
          income to net cash provided
          by operating activities:
             Cumulative effect of
              accounting change               -       21        -       21
             Depreciation and
              amortization                  198      163      794      653
             Repositioning and other
              charges                       133       80      483      412
             Payments for repositioning
              and other charges            (226)    (437)    (561)  (1,008)
             Pension and other
              postretirement expense        115      138      459      561
             Pension and other
              postretirement benefit
              payments                      (95)     (54)    (353)    (199)
             Stock option expense            16        -       77        -
             Deferred income taxes           28      (32)     451       42
             Excess tax benefits from
              share based payment
              arrangements                  (31)       -      (31)       -
             Other                           18      (98)      20      (56)
             Changes in assets and
              liabilities, net of the
              effects of
             acquisitions and
              divestitures:
                Accounts, notes and
                 other receivables          (28)     179     (573)     (94)
                Inventories                 137      123     (128)      37
                Other current assets         (5)      41      (11)      61
                Accounts payable            301      212      516      181
                Accrued liabilities          95      (11)     (15)     193
                                         ------   ------   ------   ------
     Net cash provided by operating
      activities                          1,241      839    3,211    2,442
                                         ------   ------   ------   ------
     Cash flows from investing
      activities:
         Expenditures for property,
          plant and equipment              (300)    (228)    (733)    (684)
         Proceeds from disposals of
          property, plant and equipment      42       32       87       71
         Proceeds from investments            -        -        -      285
         Cash paid for acquisitions,
          net of cash acquired              (10)    (718)    (633)  (2,679)
         Proceeds from sales of
          businesses, net of fees paid       86      962      665      997
                                         ------   ------   ------   ------
     Net cash (used for) provided by
      investing activities                 (182)      48     (614)  (2,010)
                                         ------   ------   ------   ------

     Cash flows from financing
      activities:
         Net (decrease)/increase in
          commercial paper                  299      329      (86)     534
         Net (decrease)/increase in
          short-term borrowings              (9)      91     (224)     100
         Payment of debt assumed with
          acquisitions                        -        -     (346)    (702)
         Proceeds from issuance of
          common stock                      118       33      396      167
         Proceeds from issuance of
          long-term debt                      -        -    1,239        -
         Payments of long-term debt        (648)    (834)  (1,019)    (982)
         Excess tax benefits from share
          based payment arrangements         31        -       31        -
         Repurchases of common stock       (876)    (554)  (1,896)  (1,133)
         Cash dividends paid on common
          stock                            (184)    (172)    (744)    (700)
                                         ------   ------   ------   ------
     Net cash (used for) financing
      activities                         (1,269)  (1,107)  (2,649)  (2,716)
                                         ------   ------   ------   ------

     Effect of foreign exchange rate
      changes on cash and cash
      equivalents                            19        2       42      (68)
                                         ------   ------   ------   ------
     Net (decrease) in cash and cash
      equivalents                          (191)    (218)     (10)  (2,352)
     Cash and cash equivalents at
      beginning of period                 1,415    1,452    1,234    3,586
                                         ------   ------   ------   ------
     Cash and cash equivalents at end
      of period                          $1,224   $1,234   $1,224   $1,234
                                         ======   ======   ======   ======

                       Honeywell International Inc.
   Reconciliation of Cash Provided by Operating Activities to Free Cash
   --------------------------------------------------------------------
                             Flow (Unaudited)
                             ---------------
                          (Dollars in millions)

                                         Three Months    Twelve Months
                                            Ended            Ended
                                         December 31,     December 31,
                                         ------------    -------------
                                          2006    2005    2006     2005
                                        -------  -----   -----   ------

    Cash provided by operating
     activities                          $1,241   $839   $3,211   $2,442

    Expenditures for property, plant
     and equipment                         (300)  (228)    (733)    (684)
                                           ----- -----    -----    -----

    Free cash flow                         $941   $611   $2,478   $1,758
                                          =====  =====   ======   ======

We define free cash flow as cash provided by operating activities, less cash expenditures for property, plant and equipment.

We believe that this metric is useful to investors and management as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, and to pay dividends, repurchase stock, or repay debt obligations prior to their maturities. This metric can also be used to evaluate our ability to generate cash flow from business operations and the impact that this cash flow has on our liquidity.